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Schafer: Municipal fees a barrier to more affordable housing in suburbs

July 30, 2018

Another column in an occasional series on the future of housing.

Realtor Kathy Samson knew exactly how a parcel of 6.3 acres in the northwest suburban community of Rogers should get developed.

The buyer Sampson had in mind is a builder of one-floor townhomes on concrete slabs that were perfect for retirees, veterans and others who really wanted to avoid stairs and live on just one level. These places could be thought of as affordable only by the thinnest of margins, at about $250,000 per unit.

There are some wetlands and other limitations, but the site could possibly hold 18 new units. One problem was no sewer service. The closest connection was a couple of parcels away, but in addition to bearing the cost of sewer lines, the development would get hit with a city fee to connect.

The fee alone was $15,000 per unit, Samson said. And with that, her idea of simple and affordable single-level townhomes died.

What Samson, an agent with Better Homes and Gardens Real Estate All Seasons, experienced is nothing out of the ordinary. It can cost a lot to meet the requirements of cities when building a new house.

It’s a big issue to the local builders’ association. While trade groups are rarely fans of fees and regulations, this group argues excessive costs for things that have nothing to do with providing a safe and energy efficient house push new housing out of reach of moderate income people.

What’s interesting is that the trade group’s complaint is not about any one idea but the total. If one city requirement by itself can’t make a new house too costly, a dozen sure can.

“The market is there for $200,000, $250,000 or $300,000 homes, just obviously there,” said David Siegel, executive director of a trade group now called BATC-Housing First Minnesota. “It’s extraordinarily difficult to build that affordable product and put it into the market.”

Siegel called one idea the group is kicking around the affordability impact statement, one piece of paper with all the information for prospective homeowners to see how much it costs in fees and regulatory compliance when building new housing. And, of course, that number varies depending on where the new project is going.

Siegel described a builder recently getting a new house underway in Hayward, Wis., where the permits cost $3,500. Similar projects for this builder in the east metro suburbs could generate fees of up to $20,000.

“And what we can’t exactly tell you is why,” Siegel said. “Where is that $16,000 going?”

Siegel doesn’t question many of the policy goals of the people running the region’s cities and towns, just their awareness of total costs. As an example of how it adds up, he described new design standards recently debated in Dayton, the community next door to Rogers.

Dayton is growing, with 189 single-family permits issued last year. That’s when it considered upgrading its design standards. And each of the ideas contained in a summary from May 2017 seemed like nice things to have.

Requiring a minimum depth of 24 feet for a garage meant ensuring that homeowners had the space to keep all their junk stored inside, and not leave something like an old snowblower rusting out where the neighbors had to look at it.

A 16-foot-long concrete apron extending from the garage door makes the driveway and whole property look better. Brick and natural stone on the front of the house look a lot better than vinyl siding, while requiring dormers, gables or other design features makes a single story house look taller and more elegant.

The memo went on to list the builders’ response to some of these ideas. Just the proposal to get rid of vinyl siding, the builders complained, would drive up the cost at least $5,000 and maybe more than $15,000.

“There’s no health benefit here, there’s no energy benefit here. It’s an aesthetic approach,” Siegel said. “And of course that’s not really providing market [rate] housing, because you’re restricting the market.”

Many of these ideas didn’t get adopted, he explained, but regulations that cost money are not just coming from city officials. A case in point is the new state building code.

One new relatively rule is called fall protection, among other things limiting the opening of an upstairs window only enough to squeeze out a four-inch ball. Even a toddler’s head won’t fit through an opening that small, meaning nobody can fall out.

“We don’t have folks falling out of second story windows in single-family homes,” Siegel said. “So that’s maybe $750 to $1,500, depending on how many windows. But when you tack it on with other things, that’s how you get expensive.”

Back in Rogers, a quick call into city hall got a reasonable-sounding explanation for why it costs money for new houses to hook up to utilities. Each one of those 18 new households on that six-acre site add to the burden on the overall system. It even seems possible that costly capacity additions are required up the line as more users get added.

One problem in considering reasonable-sounding costs like sewer hookup fees is that it’s not easy to determine what’s fair. But it’s worth remembering just how easy it is to end up with a house that’s financially out of the reach of families earning no better than the median income. To be affordable for a family of four that earns about 80 percent of the area’s median household income of $94,300 means spending no more than $234,500 on a house.

Samson has that six-acre parcel listed for sale in Rogers again, at a price of $279,900. Asked if it’s being pitched as land for single-family housing, she replied “a single family.” That is, it’s now being pitched as a lot for just one new house, tapping into the well on the property.

At that price just for the land, that new home wouldn’t be affordable even if the new owner chose to live in a Coleman four-person camp tent bought on sale from Walmart.

lee.schafer@startribune.com • 612-673-4302